A Message from the Managing Director and Chief Executive Officer
Our Annual General Meeting (AGM) was held in Melbourne on November 16, 2017. I wish to thank those shareholders who attended the AGM. I encourage those shareholders who could not attend (if they have not already done so) to listen to the webcast recording of the AGM presentation, and associated questions and answers, on our website.
During the quarter, LNGL made three significant announcements:
- The extension of the validity period of its current binding engineering, procurement, and construction (EPC) contract with KSJV for Magnolia LNG through June 30, 2018.
- Magnolia LNG and Meridian LNG agreed to extend the financial close date of their legally binding offtake agreement to March 31, 2018.
- Appointment of Joe B'Oris as Chief Development Officer with overall responsibility for all aspects of commercial development and marketing, offtake agreements, project development and strategy, and ensuring organizational knowledge regarding market factors impacting global LNG supply and demand.
Over the last quarter, our discussions with potential offtakers have gained momentum.
With the record breaking winter temperatures, a sharp increase in global spot LNG prices, and a gas shortage in parts of Asia, the window is closing to secure long-term LNG supply having first delivery in 2022 or early 2023. We continue to have productive and serious discussions with offtakers and remain confident in our ability to sign offtake agreements with credit-worthy buyers.
Bear Head LNG worked to close remaining conditions to fully permit the project for construction. We are attracting increasing attention from Western Canadian basin gas producers as a viable alternative outlet for their production. Discussions on agreements with producers and pipeline partners in support of advancing Bear Head LNG toward an eventual final investment decision (FID) continues.
The Company's primary focus is on finalizing offtake agreements. Additionally, we are weighing various options to extend our liquidity runway, and will report any significant developments as they occur. In keeping with our promise to shareholders, we continue to manage our liquidity closely, consistent with our stated plans. We closed December 2017 with the Company's total cash position at A$33.0 million, and remain debt free.
- On December 20, 2017, LNGL announced it had extended the validity period of its current binding engineering, procurement, and construction (EPC) contract with KSJV (a KBR - SKE&C joint venture led by KBR) for Magnolia LNG. The binding lump sum turnkey (LSTK) EPC US$4.354 billion contract is now valid through June 30, 2018. All other terms and conditions of the contract remain unchanged.
- On December 4, 2017, LNGL announced that Magnolia LNG and Meridian LNG Holdings Corporation (Meridian LNG) had agreed to extend the financial close date of their legally binding offtake agreement to March 31, 2018. All other provisions of the governing agreements not specifically amended by this extension remain in full force and effect. LNGL's agreement with Meridian LNG was signed on July 23, 2015 and included firm capacity rights at Magnolia for up to 2 million tonnes per annum (mtpa) for an initial term of 20 years with an option to extend by a further five years.
- During the December quarter, marketing of Magnolia LNG capacity continued with several counterparties. Substantially all the offtake negotiations are for initial 20-year terms under liquefaction tolling agreements (LTA) or sales and purchase agreements (SPA).
Bear Head LNG:
- During the December quarter, Bear Head LNG continued to market capacity to all three potential gas paths: U.S., offshore Nova Scotia; and Western and Central Canada.
OSMR(R) Process Technology:
- LNGL continued to examine technical improvements in the OSMR(R) technology and plant modular design to further reduce costs.
- The Company continues to engage with third-parties interested in using the OSMR(R) technology in their projects.
- LNGL held its Annual General Meeting in Melbourne on November 16, 2017. All the resolutions set out in the Notice of Annual General Meeting (AGM), were carried on a poll except for non-binding advisory Resolution 1 (Remuneration Report), which was not carried.
- On November 13, 2017, LNGL announced the appointment of Joseph (Joe) B'Oris as Chief Development Officer reporting to LNGL Managing Director and Chief Executive Officer, Greg Vesey. Joe has overall responsibility for all aspects of commercial development and marketing, offtake agreements, project development and strategy, and ensuring organizational knowledge regarding market factors impacting global LNG supply and demand.
Joe began his career at Getty Oil (later acquired by Texaco). While at Texaco, Joe was responsible for all commercial activities on the Sabine Pipeline, which is the owner and operator of the Henry Hub. Following his position at Texaco, he served in leadership roles in various LNG projects across the world for Nexen Energy/CNOOC Ltd., Shell, Marathon, and Jordan Cove LNG, where he was responsible for commercial and business development activities. Joe most recently operated a private consulting business focused on supporting the development and commercial activities of various LNG development, pipeline, and midstream companies.
- On October 6, 2017, the Board of LNGL announced that it had resolved to suspend all activity related to the re-domicile of the Company in the United States to focus on current business.
- On November 30, 2017, 1,600,000 Incentive Rights (960,000 Performance Rights and 640,000 Retention Rights) were issued to Greg Vesey (Managing Director & CEO of LNGL) following approval at the November 16, 2017 AGM.
- On December 13, 2017, 721,994 ordinary shares were issued from the conversion of 732,304 Non-Executive Director (NED) Rights, which were approved by shareholders at the November 17, 2016 AGM.
- On December 19, 2017, 776,060 NED Rights were issued following approval at the November 16, 2017 AGM.
- Following the above three (3) security movements, the number of incentive rights reported to the ASX in the Appendix 3B on December 19, 2017 was 15,277,232. The number of ordinary shares was reported as 513,701,956.
During the three-months ended December 31, 2017, net operating cash outflow was A$5.3 million, which compared with the net operating cash outflow of A$6.0 million for the threemonths ended September 30, 2017. Management believes the liquidity management plan remains on course to deliver its goal of liquidity to the end of 2018 but acknowledges there remain risks to realizing the goal.
LNGL's total cash balance as at December 31, 2017 was A$33.0 million, which compares to A$38.2 million as at September 30, 2017, reflecting a net reduction in reported cash of A$5.2 million. The change in reported cash between periods reflected net cash outflows of A$5.3 million, and a non-cash impact of A$0.1 million from currency translation effect relating to movements in exchange rates associated with cash held in denominations other than the Australian dollar (primarily U.S. dollars).
LNGL maintains a material portion of its existing cash and cash equivalents denominated in US dollars. The preponderance of forecasted cash outflows is denominated in US dollars, supporting maintenance of a majority of cash and cash equivalents denominated in US dollars as a foreign exchange risk mitigation strategy. Because LNGL's reporting currency is Australian dollars, the US dollar denominated cash balances are translated to Australian dollars at each balance sheet date, with the net effect reflected as unrealized gain (loss) from translation as a period end-toperiod end reconciling item in reported cash balances. The Company has no debt.
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About Liquefied Natural Gas Ltd
Liquefied Natural Gas Limited (ASX:LNG) (OTCMKTS:LNGLY) (LNGL) is an ASX listed company whose portfolio consists of 100% ownership of the following companies:
- Magnolia LNG, LLC (Magnolia LNG), a US-based subsidiary, which is developing an eight mtpa or greater LNG export terminal, in the Port of Lake Charles, Louisiana, USA;
- Bear Head LNG Corporation Inc. (Bear Head LNG), a Canadian based subsidiary, which is developing an 8 mtpa or greater LNG export terminal in Richmond County, Nova Scotia, Canada with potential for further expansion;
- Bear Paw Pipeline Corporation Inc. (Bear Paw), proposing to construct and operate a 62.5 km gas pipeline lateral to connect gas supply to Bear Head LNG; and
- LNG Technology Pty Ltd, a subsidiary which owns and develops the Company’s OSMR(R) LNG liquefaction process, a mid-scale LNG business model that plans to deliver lower capital and operating costs, faster construction, and improved efficiency, relative to larger traditional LNG projects.
ContactMr. Micah Hirschfield
Sr. Manager, Communications and Investor Relations
Liquefied Natural Gas Limited
Mr. Andrew Gould
Joint Company Secretary
Liquefied Natural Gas Limited